Payroll changed during the policy period which has already ended. Is it fair to retroactively charge for coverage if the payroll changed?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Nov 15, 2010

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Insurance Question from Half Day, IL

Asked on 11/15/2010

Payroll changed during the policy period which has already ended. Is it fair to retroactively charge for coverage if the payroll changed? My policy covered employee compensation and liability for a certain payroll at the time the policy started coverage. After one year, the policy ended and there were no claims, but the payroll of the company went up a bit during the policy coverage. Can the insurance company now retroactively charge more for coverage since the payroll went up?

Answer given on November 21, 2010

Business insurance policies are based on “estimated” payroll.  The policy is set up to do an annual audit to determine the correct payroll, which updates the actual premium to be charged.

While your payroll increased, some do decrease, so the premium would be reduced, if it was below the minimum premium.

If you remain with the insurance company going forward, then next year, if your payroll should decrease, then the premium will also decrease.

Your agent should work with you to try to determine an accurate, estimated, payroll, so you are not subject to a new audit and an unanticipated, increased premium.  This is why it is important to submit accurate, but not excessive payrolls when submitting for a business insurance policy

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